Oct. 1 (Bloomberg) -- Unilever, the world’s second-largest
consumer-goods maker, said sales growth weakened in the third
quarter amid a further slowdown in emerging markets, sending the
shares down the most in almost two years.

Underlying revenue for the three months rose 3 percent to
3.5 percent, the maker of Lipton tea and Dove soap said in a
statement after markets closed yesterday. That compares with 5
percent growth in both the first half and second quarter.

Unilever said emerging-market growth slackened in the third
quarter because of weak currencies in some developing countries,
though repeated its full-year goals. The Magnum maker gets about
57 percent of sales from emerging regions, making it susceptible
to slowing economies in nations such as India and China. It’s
the first time the company has given quarterly sales guidance of
any kind under Chief Executive Officer Paul Polman, who did away
with forecasts when he took the helm in 2009.

“We are concerned that emerging markets will continue to
be a drag across consumer staples for the next few quarters,”
said Alicia Forry, an analyst at Canaccord Genuity in London.
“Our numbers will need to be adjusted,” said Forry, who had
estimated 4 percent growth in third-quarter underlying sales.

Unilever fell as much as 4 percent to 27.62 euros in
Amsterdam trading, the steepest intraday drop since Feb. 2,
2012. The stock was down 3.1 percent at 27.88 euros at 1:53
p.m., dragging the consumer peer group lower. Nestle SA, the
world’s biggest food company, slid as much as 1.5 percent, while
brewer SABMiller Plc dropped as much as 4.1 percent. Procter &
Gamble Co., the world’s largest consumer-goods company, declined
2.1 percent to $75.59 in New York yesterday.

Weakening Currencies

A slowdown in emerging markets accelerated “as a result of
significant currency weakening,” according to Unilever, which
gets about three-quarters of revenue outside Europe.

Underlying sales growth strips out the effect of currency
fluctuations, yet in countries such as Indonesia, Brazil, South
Africa and India, weakening currencies have “squeezed local
incomes,” according to Sanford C. Bernstein analyst Andrew
Wood. The resulting “inflationary pressure” has hurt demand,
Liberum Capital analyst Pablo Zuanic said in a note today.

Unilever joins consumer companies including Adidas AG in
saying that currencies are affecting growth. The world’s second-largest sporting-goods maker last month reduced the lower end of
its profit outlook because of currency movements and a
distribution issue in Russia. Handbag maker Prada SpA said the
euro’s strength will weigh more heavily on full-year earnings
after first-half profit missed estimates.

Slowdown Discussion

The euro has strengthened 5.4 percent this year, the best
performer of the 10 developed-nation currencies tracked by
Bloomberg Correlation-Weighted Indexes.

Polman has been discussing a slowdown in emerging markets
for more than a year. In July 2012, he told analysts that growth
rates in regions like China, Brazil and India were slowing and
this year said it wasn’t realistic to expect sales growth in
those regions to be maintained after nine straight quarters of
double-digit gains. Unilever’s statement indicates that
underlying sales in emerging markets rose about 6 percent in the
third quarter, slowing from 10.3 percent in the first six months
of the year, Nomura analyst Mark Howden said in a note.

Developed markets remain “flat to down,” said Unilever,
which is due to report third-quarter sales figures Oct. 24.
Analysts including Bernstein’s Wood had expected a recovery in
mature markets such as the U.S. to offset the emerging-market
slowdown, yet “this did not materialize,” he said. Sales in
developed regions fell 1.6 percent in the first half.

Estimates Cut

The “disappointing” growth in developed regions should
prompt a “re-evaluation of Unilever’s strategy, particularly in
spreads,” a business that the company has struggled to turn
around, Panmure Gordon analyst Graham Jones said in a note.

Unilever continues to grow ahead of its markets and expects
underlying sales growth to improve in the fourth quarter, Polman
said in yesterday’s statement, which was released before the
company’s participation in investor conferences this week.

“For 2013, we are still on course to deliver against our
priorities of profitable volume growth ahead of our markets,
steady and sustainable core operating margin improvement and
strong cash flow,” London- and Rotterdam-based company said.

Nomura cut its estimate for Unilever’s 2013 adjusted
earnings per share by 6 percent to 1.50 euros, while Panmure
Gordon reduced its prediction by 1.3 percent to 1.52 euros.

Beyond the cuts to estimates, the “larger impact” of
yesterday’s news concerns Polman’s credibility, Wood said. The
announcement “does not create a feeling of comfort that
Unilever has achieved the reliability, consistency and
dependability that we had hoped for.”